US - Watson Wyatt LLP has attended high-level discussions at the White House which have touched on the issue of compulsory pensions in Australia and how President Bush can succeed in getting his own controversial social security reform past US labour unions.
The Heritage Foundation, a conservative think tank, organised a visit to the States by Senator Nick Sherry, the Australian politician credited with much of the reform linked with compulsory superannuation in Australia.
Also attendant at the discussions with senior Bush aides was Watson Wyatt senior consultant David Harris. The two met with Charles Blahous, special assistant to the President for economic policy, and Barry Jackson, the President’s director of strategic initiatives.
Harris said the Bush administration was interested in how Australia had succeeded in achieving compulsory superannuation, in particular how a Labor government in Australia had managed to bring trade unions on-side for the issue, and get re-elected. Although he would likely not consider introducing Australian-style compulsory pensions, the President intends to learn from international experience in developing a pensions policy for the US.
David John, social security analyst at the Heritage Foundation, said: “Compulsion is a touchy issue here. As far as Social Security is concerned, what we expect is the ability to take a portion of the social security taxes that are currently paid and invest that amount in a small number of carefully selected and regulated diversified portfolios of stocks and bonds.
However, John added: “Initially, this would be voluntary, meaning workers could decide whether or not to have one of these accounts. Eventually, young people entering the workforce might be forced to have an account, but probably not at the start. The key difference between this and true compulsion is the money would come from taxes now paid.”
James Hamilton, national director of social security lobby group For Our Grandchildren, said: “Given the adamant opposition of most Democrats, labour unions and seniors groups it is entirely counter-intuitive to us here in the States that any such initiatives would come from left of centre.”
He added: “There is much Americans can learn from the Australian reforms. What I find most interesting about the Australian systems is that the Labor Party led reform efforts. It is equally intriguing that the Australian system faced no imminent financial threat when the Labor Party enacted the changes.”
In February, Federal Reserve Board chairman Alan Greenspan testified before the Budget Committee in the US House of Representatives and advocated cutting social security benefit to balance the national books, rather than raising taxes.
Greenspan stated: “We will eventually have no choice but to make significant structural adjustments in the major retirement programmes.”
Harris has been invited to testify before the US Senate Special Committee on Aging in May. The hearing will focus on politics, policies and economics of social security systems in other countries.
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